Emera's Preferred Shares: A Steady Income Stream in a Volatile Market

Investors seeking reliable income streams in an era of economic uncertainty often turn to preferred shares, and Emera Incorporated's 4.9% PFD SER H (EMA.PR.H) offers a compelling case. Backed by the stability of regulated utility operations, this series has demonstrated dividend consistency, tax efficiency, and a structure designed to shield investors from market volatility. Let's dissect its appeal and whether it deserves a spot in your portfolio.

Dividend Consistency: A Track Record of Reliability

The Series H preferred shares have maintained quarterly dividend payments since at least 2020, with the most recent increase to $0.39525 per share in July 2025. While explicit data between 2021 and 2024 is limited in the provided records, the lack of skipped payments and the 2025 rate hike signal management's commitment to shareholders. The shares are classified as cumulative, meaning missed dividends must be paid before common shareholders receive distributions—a critical protection in stressed environments.

The dividend history aligns with Emera's broader financial discipline. The company, which operates utilities in Canada, the Caribbean, and the U.S., generates predictable cash flows from regulated assets. This stability reduces the risk of abrupt dividend cuts, even in downturns.

Tax Efficiency: The Canadian Advantage

One underappreciated feature of EMA.PR.H is its classification as an eligible dividend under Canadian tax law. For Canadian residents, this means dividends qualify for the enhanced dividend tax credit, resulting in a lower effective tax rate compared to non-eligible dividends or interest income. For example, an Ontario investor in the highest tax bracket would pay roughly 19% on eligible dividends versus 25% on non-eligible ones—a meaningful edge.

Structural Safeguards: Rate Reset and Financial Backing

EMA.PR.H's terms include a minimum rate reset on August 15, 2028, and every five years thereafter. This feature ensures that if interest rates rise, the dividend rate could adjust upward, protecting investors from being “locked in” at a suboptimal yield. While this introduces some uncertainty post-2028, it also aligns the shares with broader market conditions, potentially enhancing long-term appeal.

Emera's robust balance sheet further supports confidence. With a BBB+ credit rating and a focus on regulated assets, the company has a history of prioritizing debt and preferred share obligations. Its regulated utilities, which account for most of its revenue, provide a moat against economic shocks.

Current Market Appeal: A Hedge Against Volatility

In today's market, preferred shares like EMA.PR.H offer a middle ground between bonds and equities. With interest rates elevated but equity markets volatile, the 4.9% annual yield (based on the current $0.39525 quarterly payment) provides a steady return. This compares favorably to the 2.5–3% yields on 10-year Government of Canada bonds, while the tax advantage adds further value for Canadian investors.

Considerations and Risks

• Rate Reset Risk: The 2028 reset could lower the dividend if interest rates decline, though this is unlikely given current expectations of gradual rate normalization.
• Liquidity: Preferred shares can trade at a discount in volatile markets, though EMA.PR.H's large float and institutional ownership may mitigate this.
• Regulatory Dependence: Emera's utility earnings are tied to regulatory approvals, which could constrain growth but also provide predictability.

Investment Thesis

For income-focused investors, especially Canadian residents, EMA.PR.H is a strong contender. Its blend of tax-advantaged dividends, regulated utility backing, and cumulative structure positions it as a defensive asset. While the reset in 2028 introduces some uncertainty, the shares' yield and reliability make them a solid hedge against equity market turbulence.

Final Take

Emera's Series H preferred shares are a textbook example of a “set-and-forget” income investment. With a history of consistent payments, tax efficiency, and the safety net of regulated utilities, they're ideal for portfolios needing steady cash flow. Just ensure you understand the rate reset mechanics and monitor credit metrics as the 2028 date approaches. For now, this dividend machine remains a reliable bet.

Consider EMA.PR.H as a core holding for income, but pair it with assets that offer growth to balance the portfolio.